December 22, 2014
Behind Education Costs: Buttress — or Bloat?

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Higher Education - Behind the Trends

Behind Education Costs: Buttress — or Bloat?

Two economists argue that universities adjust costs based on how much they raise, rather than broad economic forces. Schools say they have become more efficient.

Mike Vogel | 6/10/2013

Higher education costs have risen faster than costs in virtually every other economic sector, including even health care. What’s driving those costs, however, is a contentious issue.

Critics of how universities spend point to the work of the late economist Howard Bowen. Bowen in 1980 argued that the cost of higher education, unlike what happens in most industries, isn’t determined by needs, technology, market wages and prices. Rather, it’s a function of how much revenue the schools can raise. Therefore, universities raise as much as they can and spend it all, claiming they’re pursuing “excellence” and reputation, with “excellence” defined by the universities themselves rather than by the schools’ customers. Thus, universities themselves, not broader economic forces, determine how much costs rise. Economics professor emeritus at Centre College in Kentucky Robert Martin sums up Bowen’s rule as: “The more money they have, the more they spend. The more money they raise, the costs simply ratchet up.”

In papers released this year, Martin and Louisiana State economics professor R. Carter Hill examined aggregate data from public and private universities, including Florida universities, and found the lion’s share of cost increases came from choices universities made rather than macroeconomic forces or government mandates — $2 in “voluntary” cost increases at public universities to every $1 of outside-driven increases, and at least $3 to $1 for private universities.

Martin and Benjamin Ginsberg, a Johns Hopkins University political science professor and author of “The Fall of the Faculty,” challenge the wisdom of the universities’ strategy of cutting tenured faculty while boosting spending on administrators and professionals. “Do you really provide higher academic quality by hiring more administrators than full-time faculty? That’s the question that should be asked of every single president of every single university,” Martin says. “How do you justify hiring more professional employees than you do faculty? How does that help quality?”

Florida universities make an opposing argument. They say their tenure-track cutbacks are directly related to legislative budget cuts, pointing to a $300-million cut in 2012-13 alone. Overall, the universities have seen a 35% cut in annual state funding since 2008-09, which they’ve partially offset by raising annual tuition revenue 57%.

University of South Florida provost Ralph Wilcox says his main campus alone has lost $101 million in state recurring funding from 2007-08 to 2012-13. A non-tenure teacher on a short-term contract is cheaper — less pay, more classes taught — and gives administrators more budget maneuvering room than the potentially lifetime commitment entailed in hiring someone on a tenure-track.

As for the growing number of managers, executives and administrators, universities give varying explanations, with some citing a need for compliance people to meet federal mandates. At UF, provost Joseph Glover says the largest growth at his institution is in the ranks of associate and assistant directors. They run growing enterprise units, such as in grants and research, that the state wants to see grow, he says. “It’s not taking away from the educational resources for the students,” Glover says.

At UCF, provost Tony Waldrop points out that UCF is the second-largest university in the nation and Florida’s largest university but fourth in the state in administrators. He attributed the managerial increase to growth in satellite campuses, which require administrators on site, and to the complexities of having 60,000 students.

Several universities say some of their administrative growth came from adding personnel devoted to boosting graduation rates. Also, UNF Vice President Tom Serwatka says that as the school seeks more residential students, it’s added administrators devoted to residential life. “We watch our budget to make sure the percentage going into the academic side remains constant or grows,” Serwatka says.

And while administrator ranks have grown, the state Board of Governors, in its last accountability report, says the public universities have become more efficient. Systemwide, universities cut administrative spending 8% in five years while they increased instructional and research spending overall, not per student, 2% and increased student services spending 6%.

Political science professor Benjamin Ginsberg challenges the wisdom of cutting tenured faculty while boosting administrators and professionals.

Tags: Education, Higher Education, Teaching vs. Administration

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